A Pottsville coal company that once fueled the Industrial Revolution now faces foreclosure for failing to repay $5.5 million in mortgage debt – plus interest and other charges – to a Montgomery County firm, according to papers filed in Carbon County Court.
Lehigh Coal & Navigation Co. "is in default of its obligations pursuant to the loan documents for, among other things, the borrower's failure to pay the loans in accordance with the terms of the loan documents, including upon maturity," the suit states. "Accordingly, as of March 12, 2010, the sum of $5,991,610 is immediately due and owing from the borrower on account of the loan documents."
The interest continues to mount at a rate of $1,986 a day, according to the suit.
LC&N owner James J. Curran remains hopeful his company will weather this storm.
"We're trying to get some money to finance our way out of bankruptcy," he said in a telephone interview Thursday morning. "We have 110 jobs, and we're fighting to keep them and continue our operations. These are recessionary times – they are difficult times for everybody."
BET Associates IV, LLC filed the foreclosure suit on March 17 against Lehigh Coal & Navigation on behalf of The Bruce and Robbi Toll Foundation, Bruce Toll and Douglas Topkis, Horsham. The firm wants the property foreclosed upon and sold to repay the debt.
A similar foreclosure suit is expected to be filed in Schuylkill County Court on property the company owns in that county.
LC&N owns about 8,000 acres of coal land in the two counties.
According to the 400-page suit, Toll, Topkis, the Foundation and Primerock Capital, LLC, sued LC&N in July 2008 in federal court to force it into Chapter 11 bankruptcy protection. LC&N consented to an order for relief on Aug. 28, 2008.
In August 2009, BET loaned the LC&N $3.5 million so it could continue operating in the hope that it could stabilize and eventually pay its bills.
"Given the current state of the coal market, and the fact that the debtor is currently in bankruptcy, the debtor is not in a position to obtain unsecured credit or unsecured debt to pay its necessary operating expenses," the court request for BET and the others to make the loan states.
The loan also would, the firm hoped, "preserve the value of the collateral."
A month later, that amount was increased to $5.5 million. The loans were secured by an open-end mortgage, assignment of leases and security agreement. The mortgages were recorded in both Carbon and Schuylkill counties because LC&N's property stretches into both.
The company, which has touted itself as the first producer of anthracite in the country, was founded in 1822, when Josiah White and Erskine Hazard merged their companies, Lehigh Coal Mining Company and Lehigh Navigation Company. The new company shipped coal along by river to Philadelphia and other cities to fire up manufacturing plants.
Lehigh Coal & Navigation remained the largest producer of anthracite until about 15 years ago. But plummeting coal prices in 2000 forced LC&N to shut down, resulting in the loss of 163 jobs. A $9 million loan from the U.S. Department of Agriculture allowed it to reopen in 2001, but the company has been plagued by troubles.
The state Department of Environmental Protection in 2006 revoked LC&N's permit and imposed a new management team, Coaldale Energy, on the company after it was found to have violated regulatory rules by failing to refill a huge strip mine in the Panther Valley, failing to post a large enough bond to guarantee the pit would be filled and did not comply with other environmental regulations.
The change created tension within the company, and in December 2008, LC&N reached a settlement with DEP, allowing it to reorganize and therefore avoid being forced into bankruptcy by creditors, including BET, Toll and others, to whom it owed about $7 million.
But by then, the new management team – headed by Sean Curran, the son of LC&N's owner and President John Curran – had also failed to fill in the pit and post the bond, and had accumulated an additional $2.5 million in debt, according to federal court documents.
According to documents filed in federal bankruptcy Court, Wilkes-Barre, in 2008, LC&N has lost $14 million since 2002. In December 2008, LC&N sued Coaldale Energy owner Sean Curran and his brother and Vice-President of operations James J. Curran III, in federal court, claiming they had "squandered assets" of the company for their own benefit. Information on the outcome of that case was unavailable.